Nepal's airline industry is taking another big leap forward in October as domestic airlines prepare to expand their fleets, giving Nepali passengers and tourists a new range of choice. However, the big question is will they survive the price hike in aviation fuel? And with both our airport aprons and the skies above congested, where is the space for all these new planes? The industry has passed through its first shakeout after Nepal's domestic sector was deregulated eight years ago. Fly-by-nights have been weeded out and the airlines that survived like Necon Air and new entrants such as Buddha Air, Mountain Air, Yeti Airways, Shangri-la Airways, Skyline and Cosmic Air show a new confidence in the market.

There are signs of profitabil-ity despite low airline tariffs for Nepalis, and domestic carriers are testing out new routes like Pokhara-Dolpo, and reviving old ones like Pokhara-Bhairawa. New trunk routes have opened up-for instance, Kathmandu-Bhadrapur now has seven daily flights. Some airlines are even thinking of starting Biratnagar-Nepalgunj, Bhadrapur-Pokhara and sunset ountain flights from Pokhara. After all, why should all flights go to over-crowded Kathmandu?

On the equipment side, the airlines are now shifting to aircraft types that are more suitable for their niche markets. Necon Air, which is emerging as Nepal's biggest private sector player, is so impressed with the performance of its French-made ATR 42 that it is adding two more of this type as it phases out its gas-guzzling and senile Avros. Cosmic Air will be the first airline in Nepal to acquire a SAAB 340 hoping that it will steal the edge on the Beechcrafts of Buddha and Mountain Air. Shangri-la Air is also looking at SAABs. Yeti Airways tested out a Brazilian-built Embraer last year and is now getting a newer and more fuel-efficient model. Following in Mountain Air and Buddha's success with their Raytheon-Beechcraft 1900s, especially on mountain flights, Cosmic is also looking at the Fairchild Metro as an ideal aircraft for moun-tain- viewing with its large windows and slim wings. "The truth is fares are very low and they have not changed for a long time," says Kishor Silwal, deputy general manager at Shangri-la, which is upgrading its three Twin Otter fleet with two Beech 1900Cs expected to arrive later this month. But, adds Silwal: "The domestic airline business is picking up and we are looking at a bright future."

In a country where flying is not only a luxury but also a supply and communication lifeline for about 18 of the 75 districts that are still roadless, availability of more air seats and cargo space is in itself a major development. However, most of the domestic airlines find it unprofitable doing non-touris routes alone and have to subsidise them by flying high-fare sectors like Pokhara, Lukla, Jomsom and Bharatpur. Government rules require airlines to devote 40 percent of their capacity to non-tourist destinations, but even here airlines prefer trunk routes like Bhadrapur, Biratnagar and Bhairawa to the more remote Bajhang, Taplejung or Jumla. There used to be a time when passengers had to bribe ticketing officials at Royal Nepal Airlines to get seats out of and into Kathmandu.

One of the great achievements of deregula-tion was that supply of air seats finally met the demand for them. But deregulation had a flip-side. The licensing process is still unclear. The cabinet decides and that's that. The more established airlines complain that the government is issuing licences indiscriminately, and this is shrinking their share of the pie. There are also com-plaints that some of the newer airlines are circumventing the 40 percent rule on flying non-tourist sectors.

In actual fact, none of the airlines actually take the 40 percent rule seriously, and the government also enforces it only half-heartedly. Given the lack of clear policy, reports of irregu-larities surface only when the Civil Aviation Authority of Nepal, the Tourism Ministry and airline operators decide to wash linen in public. A major grouse of the airlines is the domestic fares that were calculated on the basis of the per hour operating cost of a Twin Otter in the 1980s. (At the present rate even if all the seats on a Simra flight are sold,it will not make money.) That is why most airlines have to depend on tourist routes, and the much higher tariffs that foreigners pay, which is up to 20 times more than what Nepalis or Indians are charged in routes like Lukla-Kathmandu or Jomsom-Pokhara. Theoretically, the govern-ment fixes fares but it also allows airlines the freedom to play around plus-minus 30 percent and compete.

Regardless of that provision, Buddha Air's Birendra Basnet says airlines should be allowed to set their own fares: "After all, if passen-gers decide not to fly because the fares are too high, it will be the airline that suffers." Agrees Bijaya Shrestha of Yeti Airways: "There may be deregulation, but we don't have the freedom to set our own fares." Still, with four Twin Otters and three Embraer EMB-120s arriving soon, Yeti is set be the private domestic airline with the largest fleet. There are now 30 domestic airlines registered and the new aircraft have already created a huge parking problem at Kathmandu and Pokhara airports. At rush hour, the domestic apron at Kathmandu looks like an aircraft carrier with From top: An EMB 120 in Yeti Airways' livery on a mountain flight; Cosmic's new SAAB 340; Mountain Air's Beech 1900C; and parking problem at Lukla . planes parked wingtip to ingtip. Aircraft movement at the morning peak hour is now approaching 50 flights between 7 and 10 in the morning. Pokhara and Lukla airports are often closed with "Parking Full" signs during the peak tourist season, and planes have to circle while waiting to land.

The government is now thinking of giving parking quotas to airlines, and already requires airlines to use Bhairawa and Nepalgunj as overnight parking airports. The warning signs on congestion are already there: two weeks ago a Necon Air Avro flying in from Pokhara hit a battery charger in Kathmandu and narrowly escaped disaster. In early August there was a near-miss incident when two airliners with a total of 38 assengers nearly collided at 24,000 ft while on a sight-seeing flight near Mt Everest.

Aviation sources expect a record of 25 flights every morning to Mt Everest this season. Spacing the planes on the utbound and inbound legs is going to be tricky since the airport's radar has a monitoring range of only 45 miles. Airlines have now agreed to new one-way traffic rules for high-density routes like Mt Everest, Pokhara and Lukla. Despite all the problems, competition among the new private airlines has benefited passengers. A price war in the past three months brought down off-season fares by up to 30 percent; airlines are vying with each other with better in-flight service, frequent flyer offers, and even lottery prizes and free ticket bonanzas.